With an explosion in the elderly population and a medical industry that is transitioning to more and more “Managed Care,” the need for assisted transportation to and from medical appointments is exponentially growing. Such growth and opportunity is leading to an increase in medical transportation startups. Based on the experiences of transportation providers across the United States and Canada, the following top five mistakes can save you a lot of time, money, effort, and heartache:
I. Not being wheelchair accessible. With the rise of Uber, Lyft, and other rideshare ventures, more and more people are buying into the craze of using their personal vehicles to enter the transportation space. Although such rideshare systems can be exceptionally helpful for customers and convenient in helping independent operators to make extra money, they often fall far short in helping aspiring entrepreneurs to build, grow, and transition into a thriving business – a business with hard assets, exponential growth, increasing equity, and more.
Click Here to learn more about the limited growth potential for ride-share drivers.
Entrepreneurs seeking to build a successful transportation business need to be, as a minimum, wheelchair accessible. A single wheelchair transport can yield three and four times as much money as compared to an ambulatory transport of equal distance. Even more, a non-emergency stretcher transport of equal distance can yield six to eight times as much money. It is this much needed profit margin and cash flow that is necessary to add new assets, build infrastructure, and successfully transition from independent operator to thriving business.
II. Not being properly incorporated or insured. With ride-share systems, drivers are using their own personal vehicles, insurance, and therefore, accept 100% personal liability. This strategy can only be categorized as insane. In the event of an accident, regardless of severity, the independent operator is exposed personally and unconditionally to all liability related claims and lawsuits.
In other instances, where the independent operator is incorporated either as a corporate structure or Limited Liability Company, we have witnessed instances where the operator carries commercial insurance versus livery insurance. Needless to say, these two forms of insurance are not the same. Commercial insurance does not cover the transportation of passengers.
Ironically enough, there are instances where livery insurance can actually be cheaper for wheelchair accessible vehicles versus traditional taxi and ambulatory vehicles. The reason is because many underwriters will classify ambulatory vehicles as taxis which are often times considered “high risk.”
It is imperative that you are properly incorporated and properly insured.
III. Make your business dependent on brokers. The disaster once known as Obamacare dramatically increased the threshold for those qualifying for Medicaid. As such, Medicaid brokers were salivating as Obamacare exponentially increased their clientele and profit earning potential. This increased broker profits and led to further expansion of the location and number of Medicaid brokers operating across the country.
With an increase in Medicaid recipients came an increase in Medicaid transports making such transports more attractive to “newbie” transportation providers. Unfortunately, Medicaid brokers have the distinct practice of limiting their rates of reimbursements, especially for naïve “newbies” or those unsuspecting of how to negotiate more profitable terms.
Also, with more brokers came increasing competition for state contracts. As such, providers dependent on a particular broker, when the broker lost the contract to another broker, the provider is exposed to serious risk. Providers are not guaranteed the same terms or trip volume with the new broker. Such terms need to be renegotiated.
IV. Not collecting your money and interrupting your cash flow. Similar to Medicaid brokers, many new business owners sign agreements with various Worker Comp brokers – considering them to be a stable source of revenue. Unfortunately, some Worker Comp brokers insist on Net 45 or Net 60 payment terms. Although many Comp brokers offer better terms and higher rates of reimbursement as compared to Medicaid brokers, if you are forced to wait lengthy periods of time for your money it can significantly hamstring your growth and daily operation.
As mentioned previously, you need to negotiate advantageous terms which include payment terms of no more than Net 30. When gathering trip information, you need to gather all necessary authorization information to ensure payment of each transport. Brokers can be notorious for issuing partial payments claiming “technical grounds,” that particular services were not authorized. Again, be specific and gain all necessary authorization information. Then, you remain diligent to ensure you collect your money on time and in full.
V. Overpaying drivers which leads to going broke. We all welcome the opportunity to be generous and compensate our drivers and employees as much as possible. However, we are NOT the government – we can’t write rubber checks and call it legal. Rather, we must always work to stay within budget and make all decisions “on the margin.”
Especially in the early stages of your business, you need to remain “tight fisted” and be exceptionally cautious with your money. This includes paying a lower rate of hourly reimbursement and starting your drivers as part-time. Again, such strategic caution is critical in the early stages of your business. Drivers serving part-time allows you to better manage your clock and, thus, better manage your labor costs. When times are slow you can let drivers go for the day. If you’re busy, can keep them on the clock, working, and making money.
In time, as your business grows and finances permit, you can begin offering raises to those deserving of raises. Ultimately, no work NEEDS to equal no pay. If you are not generating revenue you cannot keep drivers on the clock. Far too many businesses make financial obligations and commitments to employees they cannot fulfill because they have not yet built steady cash flow.
Again, you must be disciplined and exceptionally prudent with your finances. Make all decisions “on the margin.”
To learn more about the growing medical transportation industry and how you can start and build a thriving business, Click Here.